Consider the two economies of Lithasia and Barylia. Economic agents in Lithasia have coordination and incentive problems, while in Barylia social surplus is maximized
Which economic system does each of these economies most likely have? Explain your answer.
A coordination problem refers to the problem of bringing agents together to trade and an incentive problem refers to the problem of aligning the interests of economic agents. Because Lithasia has both problems, it is most likely to be a command economy. On the other hand, Barylia is characterized by maximum social surplus. It is likely to be a free market economy.
You might also like to view...
On the diagram above, show the new steady-state capital-labor ratio that results from a decrease in the saving rate. Can you say what has happened to the equilibrium level of consumption per worker?
What will be an ideal response?
Using the UIP equation, what would happen to the spot rate for euros if the dollar-euro exchange rate is expected to appreciate in the future?
a. The spot rate to purchase euros would rise (dollar depreciation). b. The spot rate to purchase euros would fall (dollar appreciation). c. The spot rate to purchase euros would remain unchanged. d. The spot rate to purchase euros would remain unchanged today, but rise in the future (dollar depreciation)
Producer surplus is
A) the total difference between the total amount that producers actually receive for an item and the total amount that they would have been willing to accept. B) the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. C) the total difference between the total amount that consumers are willing to pay for an item and the total amount that producers would like to receive. D) the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.
Explain how information products are "special."
What will be an ideal response?